Why Do Startups Fail?

Of all the startups that open this year, it’s estimated that 97 percent of them will fail. That doesn’t quite put success with a start-up at the same rate as winning the lottery, but it’s not too far off (so check the Powerball Lottery results in case you’re feeling lucky). This includes so-called unicorn companies. Unicorn companies are startups that are valued at billions or even millions of dollars. If they’re failing, what hope does the little venture have? It’s a good question, but it’s more important to ask why these startups are failing in the first place.

The Wrong Leader

CEO Per Wickstrom has got some interesting ideas about leadership styles and what type of style will make a startup success. But it’s worth thinking about whether these companies have the best people as leaders behind them. These days it’s insanely easy to set up a startup company. If you have an idea, you can apply for funding. You don’t even need to go through the right channels because you can get a quick, high-interest business loan. This is going to lead to the market being filled with people who are not the right ones that you want running a company. First, they’ve most likely had very little or no experience in the business setting. Second, they don’t understand the challenges they’re going to face. Third and perhaps most importantly, they don’t take the job of setting up a startup seriously. It’s easy to think that when you set up a company you’re only taking a small risk. But it’s not the case. When these people set up companies, they are often taking the responsibility of the income for a number of different employees. If they’re startup fails, these people are going to be in difficult situations.

No Demand

It’s easy for entrepreneurs to assume that their product is going to be universally loved. After all, if you’ve come up with a fresh idea, why shouldn’t everyone love it? But it’s hardly ever the case. In fact, in many situations, you’re going to find that idea is already being marketed. Or, you just can’t get customers excited for it. Worst still, they may already be buying your theoretical product from another source. This is going to limit the amount of demand that you’ll find on the market. This could be up to the point where your company is a dud from day one. That’s why you’ve got to search for demand before you take your business loan. Otherwise, you’ll be flushing money down the toilet.

High Levels Of Competition

Don’t forget thousands of new businesses will be opened this year all over the world. Thanks to the internet many of these will be in direct competition with each other. If you want to succeed your business has got to have a recognized USP. This is something that makes it different from all the other companies on the market. That’s difficult to obtain. It could be anything from a unique way to market to a completely original product. But if you don’t have it, you won’t get the interest from customers.

Don’t let these issues put you off starting a business. Just remember to avoid them when you set up shop.